FED ECONOMIST SHARES GOOD AND BAD AT MULTI-CHAMBER LUNCHEON
ELMHURST, Ill., February 27, 2013—The good news is that America has the strongest economy in the world.
The bad news is that America has the strongest economy in the world.
That’s the mixed message that Keynote Speaker William A. Strauss from the Federal Reserve Bank of Chicago shared with some 300 businesspeople representing 11 west suburban chambers of commerce at the 11th Annual Economic Outlook Luncheon held at the Marriott Chicago Southwest in Burr Ridge on February 26.
Sponsoring chambers of commerce include the Clarendon Hills, Darien, Downers Grove, Elmhurst, Glen Ellyn, Hinsdale, Lemont, Lisle, West Suburban, Westmont and Woodridge.
Making his sixth straight appearance as Keynote Speaker, Strauss is a Senior Economist and Economic Advisor in the Economic Research Department at the Federal Reserve Bank of Chicago, which he joined in 1982.
Since the Great Recession ended in June of 2009, America’s economy has rebounded less than hoped for, but the United States is still doing better than a recession-plagued Europe, a sluggishly growing Asia and the rest of the world—although Strauss described Illinois, with all of its budgetary struggles, as the “Greece of the United States.”
Strauss reported that America’s economy expanded by only 1.5% in 2012, as compared to the recent Annualized Rate of Growth (ARG) trend of 2% to 2.5% and average of 3%. Since the economy bottom out in 2008-09, the ARG over those 14 months has been only 2.1%, compared to 5.4% and 5.3%, respectively, following the recessions of 1981-82 and 1974-75.
After losing 8.7 million jobs from December of 2007 through February of 2010, America’s workforce added two million jobs in 2012 and the unemployment rate has dropped 2.1% since the October of 2009 high. Unemployment rates are expected to dropped to 5% or 6% by the end of 2015, but may reset there as the new national standard.
The Consumer Price Index (CPI), interest rates and rate of inflation all are expected to remain below historical norms at 2% or less.
Manufacturing grew at 2.8% in 2012 and is expected to grow at 2.8% in 2013 and 3.6% in 2014. Over the past 43 months, manufacturing has grown 5.5%, creating 490,000 new jobs. Manufacturing has recaptured 80.5% of its production loss, but only 21.4% of its jobs loss.
The growth in manufacturing is fueled in part by a rebounding automobile industry, which sold 14.4% more vehicles in 2012, with increases of 15.2% and 15.8% in 2013 and 2014, respectively, as American’s replace aging personal transportation with a new purchase.
Growth in Midwest manufacturing is above norm at 10% thanks to auto and machinery.
While still well below historical norms, housing starts totaled 781,000 in 2012 and are projected to reach 948,000 in 2013 and 1.158 million in 2014.
Strauss predicted that America would be energy independent by 2025, noting that higher gas prices have been offset by savings in the cost of natural gas and electricity